The $8,000 Batch of Cookies (and other stories of year-end)

For many people, the months of November and December are punctuated by a number of social, business, and religious observances usually involving family, friends and loved ones. As the calendar fills up with these events, seemingly less time each year remains for purposes of completing the normal requirements of daily living. With that said, we make it a practice each year to contact our clients in order to remind them that by keeping their personal focus and direction in November and December often  produces substantial financial benefit in the upcoming year. We're also working hard going down to the last minute so that we can save that one extra dollar for our clients going into the New Year.

Regrettably, not everyone in the past has bought in to the program.

Some of our faithful readers from years back recall the story of “Mary and Martha”, two of our clients very similar in characteristic and means and family status. Both are mothers, with substantial (but not enormous) financial means. Both are attractive, intelligent and accomplished professional women. Both have families whom they are entirely devoted to. But both had entirely different financial outcomes when it came to the end of a particular tax year.

So let’s begin, and talk about Mary.

As is the usual procedure, we did a great deal of advance tax planning in December for Mary. We had developed a great mix of advance payments, charitable contributions of property, and income deferrals in order to drive her tax bill down (by our count) about $8,000, net. I was glowing! This is why I come to work!

With that happy news, all we needed to do was have Mary execute what we had outlined. So I called her.

After gleefully stating the happy news, I was taken aback when Mary seemed bothered, and responded, telling us “Gee, Tony, I really appreciate it, but I have to bake three batches of cookies for the folks coming in from out of town, then I have to attend a recital, then the visitors come in, and I can’t leave them alone for a minute", and she went on to recite about six or seven other “and then” parameters, (none of which were mandatory or critical).

What puzzled me was that all Mary needed to do was to apply her attention for her OWN benefit, for ONE WHOLE HOUR in order to execute what I had outlined to her,which is the equivalent of MAKING $8,000 per hour! Even so, she could not promise that she would be able to attend to tasks.

I was amazed. But what else could we do? (And we found out later that month that nothing was ever accomplished).

In any event, “judgment day” came for Mary in March. Try and try as we might, she owed about $8,000. Guess what happened? She yelled! She screamed! (She even cried!) She wondered WHAT she would tell her husband. (And THEN, she asked WHAT on earth did she do wrong?) We gently reminded her of last year’s missed planning opportunity, while thinking to ourselves that there was a gourmet bakery down the street from her that could have supplied the requisite amount of cookies (of superior quality, no less!) for about 1/100 of the cost.

(Sic transit gloria mundi). Man, wasn't THAT a costly batch of cookies!

But, what provides hope and purpose to work each day are clients like dear Martha. (Again, let me explain).

With twelve working days left in the year, Martha (who had recently moved) said the following: “I have this old painting going back into the 1700’s that is just taking up space. Should I donate it?” (To a dedicated tax practitioner, this statement is akin to asking a stray cat if he would like to visit the fish market for a few hours, all expenses paid).

 To make a happy long story an even happier shorter one, the painting appraised well into the five figures and delivery was effected to a very happy charity by year end, netting Martha a huge, (and necessary) tax benefit, at zero cost to her. I even was asked to place my "mug" in the commemorative donation pictures, (for doing absolutely nothing!)

You might think Martha was plum lucky. Not hardly. Martha was paying attention to our admonitions, and was playing the game to the last pitch, while Mary had left the game, and was found in the year end clubhouse hot tub, eating chicken wings as her team batted in the 9th inning. I have told people for years that charitable donations of property net huge tax benefits at no cost. Some of them get it. Some of them are tired of hearing it. (However, I will keep saying it).

Any devout sports fan will recount to you all of the instances where games were won (or lost) during the last possible minutes, such as Super Bowl XLIX. It mattered little what happened the 59 minutes before. The ending interception won the game for New England. To this end, year-end tax and financial planning is absolutely no different. What is done at year end can truly be the difference between feast (or fast), financially speaking.

So, how do you increase your chances of year-end success?

No. 1: Pay attention, and be proactive to your own financial situation, right down to the wire.

No 2: Find (and work with) a tax practitioner of like-minded sensibilities and sensitivities, who is not living out his or her own “Mary”-like experience during the holidays, and is there for you when you are in need of help.

I believe there are many good points of guidance one can derive from the above story, but the one that best comes to mind for me is something that our beloved high-school basketball coach (and friend) the late Phil Ragozzino at Rippowam High in Stamford CT would say constantly. “Play every game out until you hear the buzzer”.

God rest your soul, Rags. I am doing my best to tell my people, every single day. (And Coach, as you would tell us, not everyone gets what they're told).

Please accept my best wishes for the happiest of holiday seasons and may 2016 be your best year ever.